Are You Creating or Replacing?

Are you creating something new or replacing something that’s already there? If you’re replacing, you need to do much different things than if you’re creating something new.

Every time you try to get your ideas to spread, you have to break connections. This is a lot harder if you’re trying to replace a deeply embedded idea.

Here’s how I’m thinking about it:

Replacement is like trying to knock out the red target in the middle of the diagram. The triangles might be suppliers, or complementary products, and the circles might be customers. The point is, the idea is really embedded.

If you’re trying to replace something, you have to come up with an idea that is MUCH better than the one you’re trying to replace. Here is how Stowe Boyd put it today talking about the new Microsoft Phone:

“The iPhone was easily an order-of-magnitude better that the shit phones we all tolerated when it launched. Microsoft had years to come up with something awesome, and it’s ok. Which means death, today.”

Replacement means being an order-of-magnitude better.

More academically, here is Clayton Christensen saying something similar in The Innovator’s Cookbook, and pretty good edited volume put together by Steven Johnson:

“Even if innovators succeed in cramming disruptive technology into an existing market application, the incumbents typically win. Digital photography, online consumer banking, and hybrid-electric vehicles are examples of potentially disruptive technologies that were deployed in such a sustaining fashion. Billions were spent on these innovation to beat out already acceptable and habitual technology; little net growth resulted, as sales of the new products cannibalized sales of the old; and the industry leaders maintained their rule.”

In short, replacement is very difficult. You have to stand out from the crowd, which is awfully hard, and it requires a quantum leap in functionality.

If you’re creating, you face a different set of problems. When you create something new, you don’t have any connections at all – you have to create them from nothing. This is tough.

However, the payoff to creating something new can be a lot higher than replacing. And there are some ideas that make this easier. Not all crazy ideas are great, but most great ideas are crazy: Fred Wilson says:

“When people ask me, ‘how do you know which companies and services are going to be the biggest successes?’, I usually tell them to look for the companies and services that are mocked and misunderstood. For some reason, that correlates highly with the biggest breakout successes.”

New ideas start out crappy: Greg Satell has a great interpretation of Christensen’s research, and he summarizes it by saying that disruptive innovations come through changing the basis of competition. To do this, you have to smart small, often with a new customer base, and with ideas that aren’t yet fully formed. This is completely different from how you approach replacement ideas.

For new ideas, you can use things like the lean start-up methodology: this includes the concept of the minimum viable product. The basic idea here is that you get a working version of your idea out as quickly as possible, so that you can learn what works and what doesn’t. This requires clear thinking about metrics, and a good business model, which you test all the way through.

Think about the difference between coming up with something that is an order-of-magnitude better than what’s currently out there, versus putting out a minimum viable product and experimenting. They are completely different. They require different skills, different mindsets, and different methods for experimenting and testing your assumptions.

That is why you have to be clear about whether you’re creating or replacing.